UPDATE 1-Apple cuts memory chip order to Samsung for new iPhone-source

* Apple buying fewer Samsung memory chips for iPhone 5 -
source

* Apple switches to Toshiba, Elpida, Hynix chips - media

* Also switching iPhone 5 battery suppliers - media

* Samsung shares up 4 pct in broad tech rally

(Adds details, shares)

SEOUL, Sept 7 Apple Inc (AAPL.O) has reduced its
orders for memory chips for its new iPhone from its main
supplier and competitor Samsung Electronics Co (005930.KS), a
source with direct knowledge of the matter said on Friday.

Apple has been cutting back its orders from Samsung as it
seeks to diversify its memory chip supply lines, although the
South Korean firm remains on the list of initial suppliers for
the new iPhone, the source told Reuters. The person declined to
be named because the negotiations are confidential.

The Korea Economic Daily, citing an unnamed industry source,
reported on Friday that Apple had dropped Samsung from the list
of memory chip suppliers for the first batch of the new iPhone,
the iPhone 5, which is widely expected to be unveiled next
Wednesday. The report said Apple instead picked Japan's Toshiba
Corp (6502.T), Elpida Memory ELPDK.PK and Korea's SK Hynix
(000660.KS) to supply DRAM and NAND chips.

"Samsung is still on the list of initial memory chip
suppliers (for new iPhones). But Apple orders have been trending
down and Samsung is making up for the reduced order from others,
notably Samsung's handset business," the Reuters source said.

Samsung's handset business, led by robust sales of its
flagship Galaxy line of products, has become the most important
earnings pillar, bringing in around two-thirds of Samsung's
overall profit, and is driving sales of component - from memory
chips to micro processors and displays.

Samsung, the world's top smartphone maker, said on Thursday
that sales of its Galaxy S III smartphones topped 20 million
since its late-May debut.

The source denied market speculation that the reduced orders
from Apple were prompted by a souring relationship between the
two companies, which are locked in global patent disputes, and
said Apple had already been looking to widen its supply chain.

Bernstein analysts estimate Apple's purchases of mobile DRAM
and NAND chips from Samsung have fallen significantly and now
only account for around 2.5 percent of Samsung's 2012 earnings.

DIVERSIFICATION

California-based Apple frequently faces a supply crunch when
a new product is launched, triggering a consumer stampede that
drives demand far in excess of supply and production capability.

Earlier this year, a source told Reuters that Elpida was
selling more than half of its mobile DRAM chips to Apple.

For batteries used in the next iPhone, Apple picked China's
Amperex Technology Ltd and Japan's Panasonic Corp (6752.T),
dropping Samsung SDI (006400.KS) from the initial supplier list,
the Korea Economic Daily said.
In flat-panel displays, LG Display (034220.KS) is one of the
dominant suppliers for the new iPhone, according to sources
close to the matter, as Japan's Sharp Corp (6753.T) has fallen
behind schedule on iPhone display production. [ID:nL4E8JV2RZ]

Apple and Samsung have taken their bruising patent disputes
to some 10 countries as they vie for market share in the booming
mobile industry. Apple won a landmark victory last month after a
U.S. jury found the South Korean firm had copied key features of
the iPhone and awarded Apple $1.05 billion in damages.
[ID:nL2E8JOHDZ]

Samsung declined to comment and Apple was not immediately
available to comment.

Still, Samsung remains the sole producer of Apple-designed
micro chips that power the iPhone and iPad, making their
relationship too important for either party to put at risk.

Samsung's component sales could hit $13 billion next year
and bring in $2.2 billion in operating profit, according to a
recent estimate by Morgan Stanley. That's nearly 8 percent of
estimated group operating profit.

Shares in Samsung rose more than 4 percent on Friday to a
2-week high - and set for their biggest one-day gain in 6 weeks.
The gain was broadly in line with a technology sector rally
after a maker of solid-state drives, which uses flash memory
chips, warned of component shortages, raising expectations that
production cutbacks have stopped a slump in prices for flash
memory chips. [ID:nL4E8K58U2]

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SAN FRANCISCO/NEW YORK, Oct 4 Avaya Inc's
private equity owners explored selling the telecommunications
equipment company earlier this year, instead of taking it
public, and had talks with Oracle Corp , three people
familiar with the matter said this week.